Student Loan FAQ
How does consolidating affect my credit report?
Consolidating your student loans may improve your credit score over time but initially your credit may be negatively affected. When you consolidate student loans, the government pays off your eligible debts in full with a Direct Consolidation Loan. Within 60 to 90 days after consolidation, your credit report should show loans in current status and paid in full.
What if my student debt is in default?
There are 3 options for a defaulted student loans. Pay them off in full, leave them as is and wait for your wages to be garnished or consolidate them. When you consolidate student debt, it takes 45 to 90 days for the loans to be taken out of default and shown as paid in full in your credit report.
What is the interest rate?
Direct Consolidation Loans have a fixed interest rate for the full term. The fixed rate is based on a weighted average calculation of the interest rates on the student loans being consolidated, rounded up to the nearest one-eighth of 1%. The rate will not go above 8.25%.
When can I consolidate?
You are normally eligible to consolidate student loans after you graduate, leave school, or drop below half-time enrollment. For the purposes of this student loan faq page, half time enrollment means two courses of three credits each.
Why should I consolidate?
Consolidation can simplify your repayment by combining your loans to one payment and can lower monthly payments. You may also have access to alternative repayment plans you would otherwise not have access to and you may be able to switch your variable interest rate loans to a fixed interest rate. You will also receive more deferment and forbearance options by consolidating student loans if you have trouble paying on your new Direct Consolidation Loan.
What are the requirements to consolidate?
You must have at least one Direct Consolidation or FFEL Program loan that is in a grace period, in repayment status, deferment, forbearance, or in default. It cannot show “originated” as the last status.
What if I consolidated and need to add loans to my program
We discovered in our research for this student loan faq page that you cannot consolidate existing consolidation loans unless you include an additional Direct Consolidation or FFEL Program loan. However, under certain circumstances you may re-consolidate an existing FFEL Consolidation account without including any additional loans.
How can my spouse and I consolidate our student loans jointly?
You cannot consolidate your federal student debts jointly. Direct consolidation loans have not been available to joint borrowers since July 1, 2006. This may work in your favor since Public Service Loan Forgiveness is not available for jointly consolidated debt.
What if I am currently paying on my student loans and want to consolidate them now?
This is exactly the situation most people find themselves in. Remember that your individual creditors will be receiving payoff amounts from Direct Loans once you consolidate. You should keep making your regular payments until your creditors notify you, one by one, that the respective debts are paid in full. Treat each creditor independently and individually. You may hear from one prior to hearing from another. You may find yourself in a situation where you can stop paying one but still have to pay another. It is rare but it may happen.
We periodically update the Student Loan FAQ page as changes in creditor policies occur. Check back often to stay current with the most recent information.